We lower our ’23e EBIT by 2%
Improved infrastructure will boost long-term growth
Q3’22 expectations
We expect GARO to deliver Q3 net sales of SEK 321m, up 9% y-o-y. We expect growth of 10% in E-mobility in this quarter, mainly driven by sales of public chargers. We see this compensating for softer home charger demand. Rising EV sales continue to demonstrate an underlying demand for chargers, but both are still affected by component shortages, leading to long wait times for EV deliveries, directly affecting the need for chargers at home. We expect the company to face continued temporary component issues for the rest of the year but expect this to improve incrementally until the beginning of ’23, as it continues to search for new suppliers. We foresee EBIT of SEK 41m and an EBIT margin of 12.8%, contributing to a net profit of SEK 31m.
Stabilize component supply is key
We make only minor estimate changes, lowering our ’23 EBIT by 2%. For the group, we expect 15% organic growth in ’23e, supported by 35% growth in E-mobility, which benefits from a more balanced components supply. However, we foresee Electrification to face softer installations in ’23e due to lower new build starts. This should lead to 40% EBIT growth, with the margin going from 14.3% in ‘22e to 17.4% in ‘23e, again helped by a better component supply situation.
Ramping up charging infrastructure
The Tidöavtalet agreement between Sweden’s new governing parties contains a focus on building up Sweden’s charging infrastructure by supporting areas with slow rollouts, requiring build-outs and lowering costs. We expect this will create a snowball effect, as improved infrastructure should accelerate EV and electrical truck growth, supporting GARO’s long-term potential. GARO is currently trading at ~16.8x ’23 EV/EBIT and we reiterate our fair value range of SEK 170-220.
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